USD/JPY recovers in tandem with Nikkei, but still below 111.00

The USD/JPY pair stalled its gradual recovery mode from two-week troughs reached earlier today at 110.78, and now struggles hard to regain 111 handle amid improving risk sentiment.

USD/JPY: Daily Classic S3 tested at 110.76

The spot trims losses, although remains deep in the red amid the latest headlines from the Japanese Komeito Party leader Yamaguchi, who noted that  the new Bank of Japan (BOJ) Governor should avoid making drastic changes to the monetary policy.

Moreover, a risk-aversion wave gripped Asia, after reports hit the wires that Greece threatened to opt out of next payment without a debt deal if creditors cannot agree on debt relief, offering further support to the JPY bulls, which sent the rate to fresh two-week lows.

Over the last hours, the major is seen recovering ground amid a recovery in the Japanese stocks, which indicates a slight improvement in risk condition. However, it remains to be seen if USD/JPY can take on the recovery above 111 handle, as risk-off sentiment is expected to extend in the European session, with the European traders reacting to the Greek headlines.

Calendar-wise, the Japanese data dump had limited impact on the major, as the prices were purely driven by risk-sentiment and aforementioned Yamaguchi’s comments. Next of note for the major remains the US dataflow due later in the NA session, which includes the Core PCE price index, personal spending and consumer confidence numbers.

USD/JPY Technical levels                 

Omkar Godbole, Analyst at FXStreet noted: “Pair’s failure around 112.00 levels last week, followed by a break below 111.00 levels has established a falling top formation on the daily chart. The RSI has failed to get back above 50.00 (into bullish territory) and is now sloping downwards. The pair thus appears on track to test 110.23 (May 18 low) and 110.00 levels. A daily close below 110.00 would establish a falling bottom formation and shall open doors for a sell-off to 108.13 (Apr 17 low). On the higher side, only a daily close above 111.85 (falling channel resistance) would signal bearish invalidation.”